OPINION:Taking seriously a socialist critique

Michael J. Hicks, PhD

Monday, May 13, 2019 7:36 PM

Michael J. Hicks

Socialism seems to be garnering renewed interest in media and
political circles. A millionaire socialist currently leads in some
polling for the Democratic Party nomination in 2020, and the most
outspoken new members of Congress unabashedly proclaim themselves
democratic socialists. Most readers will chuckle at the rise in
popularity of a form of government that has condemned so many to
impoverished misery. It is easy to dismiss much of what new socialists
say, and in truth, much of it is bizarre enough that it truly hurts
their cause. Short film clips of Bernie Sanders or Alexandria
Ocasio-Cortez will surely feature prominently in GOP campaign ads, if
not in the Democratic primary.

Still, if you believe that individual agency, including the right to
own the fruits of one’s labor are essential to human flourishing, simply
defeating the current crop of socialists at the polls might not be
enough. No one benefits from a policy debate that is drawn so inexorably
towards the dangerous fringes of ideology. We would do well as a nation
to stand well away from the precipice of tyranny that follows socialism
as night follows day.

We need to do more than simply laugh at their naïveté. Perhaps, those
of us who believe in freedom need to ask ourselves some tough questions
about ourselves. Instead of simply dismissing the democratic socialist,
maybe we ought to ask a simple question—What part of their criticism of
our market economy is right, and what should we do about it?

In truth, these are easy questions. Maybe the only thing the
democratic socialists actually get right in their criticism of our
market economy is the exaggerated influence of big business in tax
policy and spending. Nowhere is this more apparent than in state and
local tax incentives. We might even be at a turning point.

Wisconsin’s disastrous deal with Foxconn effectively taxed every
family more than $1,500 to pay the company to locate in the state. Even
before the deal fell apart, Governor Scott Walker was ousted from office
over the fiasco. Other states, including Indiana, are waging court
battles to keep their proposals to Foxconn a secret.

The payments to Amazon promised by Virginia and New York were bad
enough to cause mini-revolts in both states. Folks, Representative
Ocasio-Cortez was right to oppose the New York deal, and citizens of all
stripes joined her dissent. She was wrong to wish Amazon away from her
district. It is a fine business that can afford to pay for its own
headquarters. Today states, including Indiana, are doing everything they
can to keep their own proposals to Amazon a secret.

The Foxconn and Amazon deals stretch the conscience. There can be
little more outrageous than large, successful companies forcing
communities to ransom their futures to shareholders. Both companies took
deals that amount to hundreds of thousands of dollars per new job. As
astonishing as this is, it is nothing compared to Indiana’s new tax
exemption for data centers.

Quietly, with zero fanfare, the Indiana legislature passed a 50-year
tax exemption for data centers. The exemptions cover property and sales
taxes for half a century. For several days, I’ve been scouring academic
studies and reports to find evidence of nothing like it in American
history. I have found nothing even remotely as expansive. I even spoke
with some well-known researchers at think tanks. The guy on the left,
Greg LeRoy, called the plan “heinous” and the guy on the right, Mike
LaFaive, said it “strained credulity.” They knew of nothing faintly
resembling this in American history.

By my calculations, the data center tax exemption would cost
communities something more than $4 million per job. This is just
property taxes for establishments that on average create just 30 jobs.
The lost sales tax on equipment is perhaps $52 million and I struggle to
imagine what the lost taxes on electricity sales would be, since data
centers use about 2 percent of all electricity in the US.

At the risk of piling on about the badness of this, the General
Assembly decided to make this tax exemption retroactive to data centers
built after 2012. This at least clarifies the intent of this
legislation; it is a giveaway, and nothing more. There is simply no way
to sugarcoat the fact that Indiana just passed the single worst tax
incentive in American history.

To be fair, local governments rightfully ask for more flexibility,
and this law does not require local governments to grant the exemptions.
Still, I don’t think this gives them much flexibility. Moreover, this
abandonment of fiscally conservative principles by the General Assembly
stuns the senses. To make things worse, this law seems tailored
primarily for Hammond, where taxpayers passed a school property
referendum just last year. Voters might be inclined to ask their elected
leaders why it is necessary to pass a school referendum while some tech
giant gets a lifetime tax exemption?

Socialism is a bad idea that failed the grand social experiments of
the 20th and 21st centuries. Most Americans know this. However, the
enduring wrongness of socialism does not mean socialists are wrong about
everything. They are right to view the breathtakingly unequal treatment
of large business as unprincipled failure of government. Democratic
socialists are politically wise to note the deep political hypocrisy of
these deals by erstwhile conservatives.

Still, I don’t think the risk to Americans is that voters will
suddenly swarm to bad ideas of democratic socialism. The real risk is
that given the choice between democratic socialists and republican
socialists, they choose the one that at least sticks to its principles.